Genuine STCG can’t be reclassified as unexplained cash credit without adverse material.

“2. We have considered the impugned order with the assistance of the learned Counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of the shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd. (“RFL”) is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax (“STT”) has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against assessee that it has participated in any price rigging in the market on the shares of RFL.

3. Therefore we find nothing perverse in the order of the Tribunal.

4. Mr. Walve placed reliance on a judgment of the Apex Court in Principal Commissioner of Income-tax (Central)-1 v. NRA Iron & Steel (P.) Ltd. 1 but that does not help the revenue in as much as the facts in that case were entirely different.

5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think thatquestion as pressed raises any substantial question of law.

6. The appeal is devoid of merits and it is dismissed with no order as to costs.”

“4. The A.O. did not accept respondent’s claim of long ferm capital gain and added the same in respondent’s income under Section 68 of the Act. While allowing the appeal filed by respondent, the CIT[A] deleted the addition made under Section 68 of the Act. The CIT[A] has observed that the A.O. himself has stated that SEBI had conducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it was conclusively proved that it was the said broker who had inflated the price of the said scrip in RFL. The CIT[A] also did not find anything wrong in respondent doing only one transaction with the said broker in the scrip of RFL. The CIT[A] came to the conclusion that respondent brought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent’s bank account has been debited. The shares were also transferred into respondent’s Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instructions slip and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent’s bank account. In view thereof, the CIT[A] found there was no reason to add the capital gains as unexplained cash credit under Section 68 of the Act. The tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal.

5. We also find no infirmity in the order passed by the ITAT and no substantial questions of law as proposed in the appeal arises.”

“13. We heard the rival contentions assessee has furnished all the details in support of purchase and sale of shares of Mis Shreenath Commercial. & Finance Ltd and the said and the said fact has been recorded by the AQ in paragraph 2.5 of the assessment order. We noticed that the assessee has purchased the shares through preferential allotment and the said shares had lock in period of one year. The assessee has held 15,00,000 shares in the above said company and the assessee has sold 11,20,000 shares during the year under consideration almost after one year after expiry of lock in period. We notice that the assessing officer has not found fault with any of the documents furnished by the assessee in support of purchase and sale of shares. There is also no allegation made that the assessee was part of ring which indulged in the alleged price rigging. The allegation of the AO is that the assessee has availed accommodation entries by way of long term capital gains. We notice that an identical case of allegations that the assessee has availed accommodation entries for bogus capital gains was examined by the Hon’ble jurisdictional Bombay High Court in the case of Shyam Power (supra). The decision rendered by Hon’ble Bombay High Court in the above said case is extracted below:-

“3. Mr. Sureshkumar seriously complained that such finding rendered concurrently should not have been interfered with by the Tribunal. In further Appeal, the Tribunal proceeded not by analyzing this material and concluding that findings of fact concurrently rendered by the Assessing Officer and the Commissioner are perverse. The Tribunal proceeded on the footing that onus was on the Department to nail the Assessee through a proper evidence and that there was some cash transaction through these suspected brokers, on whom there was an investigation conducted by the Department. Once the onus on the Department was discharged, according to Mr. Sureshkumr, by the Revenue-Department, then, such a finding by the Tribunal raises a substantial question of law. The Appeal, therefore, be admitted.

4. Mr. Gopal, learned Counsel appearing on behalf of the Assessee in each of these Appeals, invites our attention to the finding of the Tribunal. He submits that if this was nothing but an accommodation of cash or conversion of unaccounted money into accounted one, then, the evidence should have been complete. Change of circumstances ought to have, after the result of the investigation, connected the Assessee in some way or either with these brokers and the persons floating the two companies. It is only, after the Assessee who is supposed to dealing in shares and producing all the details including the DMAT account, the Exchange at Calcutta confirming the transaction, that the Appeal of the Assessee has been rightly allowed. The Tribunal has not merely interfered with the concurrent orders because another use another view was possible. It interfered because it was required to interfere with them as the Commissioner and the Assessing Officer failed to note some relevant and germane material. In these circumstances, he submits that the Appeals do not raise any substantial question of law and deserve to be dismissed.

“2. We have considered the impugned order with the assistance of learned counsels and we have no reason to interfere. There is a finding of fact by the Tribunal that the transaction of purchase and sale of shares of the alleged penny stock of shares of Ramkrishna Fincap Ltd (“RFL”) is done through stock exchange and through the registered Stock Brokers. The payments have been made through banking channels and even Security Transaction Tax (“STT”) has also been paid. The Assessing Officer also has not criticized the documentation involving the sale and purchase of shares. The Tribunal has also come to a finding that there is no allegation against the assessee that it has participated in any price rigging in the market on the shares of RFL

3. Therefore we find nothing perverse in the order of the Tribunal.

4. Mr. Walve placed reliance on a judgement of the Apex Court in Principal Commissioner of Income tax (Central)-1 v. NRA Iron & Steel (P) Ltd (2019) 48)(SC) but that does not help the revenue in as much as the facts in that case were entirely different.

5. In our view, the Tribunal has not committed any perversity or applied incorrect principles to the given facts and when the facts and circumstances are properly analysed and correct test is applied to decide the issue at hand, then, we do not think that question as pressed raiscs any substantial question of law.”

“We have given our anxious thought and consideration to the matter in hand. The AO has disallowed the claim of the assessee based on analysis of the information received from Directorate of Investigation as a result of enquires undertaken by the officers of the Directorate. Based on the said information received, the AO has observed a pattern in the trading in scripts of those companies that has resulted in the claim of short-term capital loss to the assessee. e. Such companies were seen to have little financial credentials, no profitability and no apparent explanation for in prices followed by a steep fall in price of shares. Besides, abrupt rise in price there are statements of brokers/ entry providers who have accepted that they were involved in the scam of price rigging to facilitate accommodation entries to beneficiaries who have routed their unaccounted cash into the books through circuitous means. However, at the same time the assessee has produced documents to substantiate the genuineness of the transactions carried out through banking channels, through the medium of portfolio management whereby there is no contact between the buyer and the seller. The fact remains that there is direct evidence placed on record by the assessee to support the genuineness of the impugned transactions such as contract notes, share certificates, corroborative evidence indicating purchase/ sale through registered broker as juxtaposed against the findings of the AO based on the general report from Investigation and the modus operandi adopted by unscrupulous entry providers. There is no denying that there is no assessee-specific material on record of the AO to pin-point that the assessee has entered into an unholy nexus with entry providers so as to stage manage accommodation entry of STCL. The statements relied on by the AO in the nature of admissions are bereft of corroborative material to implicate the assessee herein in such scam. At the same time the material furnished by assessee to substantiate its claim remains unchallenged and uncontroverted. The purchases were neither off- market nor through preferential allotment. Besides, no copy of any report of information received was supplied to the assessee. The assessee was not confronted with any statement or material allegedly detrimental to the assessee arising or culled out of the Investigation report. Thus, the fact remains that the findings of the lower authorities are not based on evidence but on generalizations and probabilities. The AO could not place anything on record, maybe through a process of his own enquiry, to decisively prove that assessee has obtained bogus STCL through his connivance with entry operators / exit providers. No such enquiry or investigation is seen carried by the AO other than borrowing information to be used against the assessee from the general report of Investigation Directorate. The claim of the assessee appears to have been rejected more on the basis of presumption rather than evidence. The fact also remains that copies of statements used against the assessee were not provided to the assessee. It certainly has incapacitated the assessee from effectively rebutting the same and also from seeking an opportunity for cross examination. When copies of statements relied upon were not provided, when there was no opportunity to cross examine those witnesses whose statements were relied upon by the AO to conclude that the transaction in question was part of penny scam, we have no hesitation in holding that the lower authorities erred in disallowing the claim stating that the assessee failed to provide cogent and convincing reply to the allegations raised. We observe from the record that in identical situation the Coordinate Bench of ITAT in ITA Nos. 4843 & 1228/Mum/2018 for Assessment Year 2013-14 & 2014-15 in the case of Ramprasad Agrawal Vrs. ITO (reported in  172 – Mum Trib) and Kamla Devi S. Doshi vrs. ITO reported in 88 773 (Mum-Trib) decided the issue in favour of the assessee on merits. From the above decision, it is trite that denial of such crucial rights is a fatal flaw that renders the assessment order a nullity. An assessment purely based on suspicion, surmises and conjectures without any tangible evidence on record against the assessee of any connivance or collusion is unsustainable in law.”